Safe and Sound

Maxwell State Bank

Maxwell, IA
5
Star Rating
Maxwell State Bank is a Maxwell, IA-based, FDIC-insured bank dating back to 1943. As of December 31, 2017, the bank had equity of $4.9 million on $27.8 million in assets.

With 4 full-time employees, the bank has amassed loans and leases worth $7.8 million, including real estate loans of $3.4 million. U.S. bank customers currently have $22.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Maxwell State Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that a bank's level of capital is a crucial measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, Maxwell State Bank racked up 24 out of a possible 30 points, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Maxwell State Bank's Tier 1 capital ratio was 33.40 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic difficulties.

Overall, Maxwell State Bank held equity amounting to 17.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having large numbers of these kinds of assets means a bank may have to use capital to cover losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and elevating the risk of a failure in the future.

Maxwell State Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Maxwell State Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Maxwell State Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, Maxwell State Bank scored 16 out of a possible 30, better than the national average of 15.12.

One key measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by total equity. Maxwell State Bank's most recent annualized quarterly return on equity was 7.82 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $367,000 on total equity of $4.9 million. The bank had an annualized return on average assets, or ROA, of 1.30 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.